Netanyahu's Crypto Sanctions Gambit Sparks Fierce Backlash

By גד ליאור

Translated & summarized from Ynet by baba

CenterCharged tone

Hebrew · 7 newsrooms covering

Prime Minister Benjamin Netanyahu's suggestion to use cryptocurrency to bypass sanctions has drawn sharp criticism from Bank of Israel and numerous economic experts. Bank of Israel stated cryptocurrencies cannot bypass sanctions and stressed maintaining trade relations. Experts warned the proposal could isolate Israel, harm its high-tech sector, lead to capital flight, and damage its global financial standing. Netanyahu defended his idea, citing past economic successes, but faced widespread disbelief regarding his claims of preparing a plan.

The story in 5 lines · by baba

Prime Minister Netanyahu suggested using cryptocurrency to bypass potential sanctions on Israel.
Bank of Israel issued a rare, sharp statement calling the idea unworkable and harmful.
Experts warned the proposal could isolate Israel, damage its economy, and harm its high-tech sector.
Former officials questioned Netanyahu's judgment and compared his idea to that of pariah states.
Netanyahu defended his approach, citing past economic achievements and acknowledging objections.

Netanyahu's Crypto Sanctions Gambit Sparks Fierce Backlash — Editorial illustration generated by baba News, not a photograph of the event.

Prime Minister Benjamin Netanyahu has defended his controversial proposal to explore the use of cryptocurrency as a means to circumvent potential sanctions on Israel's banking system. In a Channel 14 interview, Netanyahu stated that crypto is one of several tools, not necessarily to be used, acknowledging the objections but asserting his commitment to Israel's economic prosperity, citing his past successes in fostering growth, breaking monopolies, and reducing public spending. He claimed to have ordered a plan for digital currencies, though sources within economic ministries and even the Prime Minister's Office deny knowledge of such a directive.

Bank of Israel issued a rare and sharp rebuke, stating that "cryptocurrencies cannot serve as a bypass for sanctions." The central bank emphasized the importance of maintaining strong economic ties with key trading partners and focusing on preventing sanctions altogether, noting that this issue falls under the political echelon's responsibility.

Former senior government officials, academics, and economists have expressed shock and anger at Netanyahu's suggestion. Yair Avidan, former Supervisor of Banks, clarified that blockchain technology does not inherently bypass sanctions, as it requires the cooperation of banks and trade partners who are subject to legal compliance. He suggested blockchain could aid financial resilience during crises but is not a solution for sanctions themselves, which require responsible policy and maintained trade relations.

Former Director General of the Ministry of Finance, Yarom Ariav, called Netanyahu's statement a "blaring warning signal," comparing the idea of financial workarounds to the strategies of isolated regimes like Iran and apartheid-era South Africa. He warned of severe consequences, including capital flight, a drop in credit ratings, and damage to Israel's reputation, questioning Netanyahu's judgment.

Professor Yair Zimon of Tel Aviv University described the proposal as "extreme, dangerous, and irresponsible," warning it would sever Israel from the global financial system and harm its trade and high-tech sectors. He argued that Israel's open economy relies on international trade, foreign investment, and access to global clearing systems like SWIFT, which are incompatible with unregulated, volatile cryptocurrencies.

Other experts, including Professor Manuel Trachtenberg and former Minister Shimon Shetreet, echoed these concerns, stating that Netanyahu's approach risks isolating Israel and turning it into a pariah state. They argued that embracing crypto as a sanctions bypass signals a dangerous detachment from global economic realities and could lead to economic collapse, capital flight, and a severe decline in the shekel's value. The Israeli High-Tech Council also condemned the idea, stating it would "certify the destruction of Israeli high-tech."